Canadian Government Tightens Mortgage Lending Rules


 The new Liberal government on Friday confirmed it is tightening lending rules for residential mortgages, setting a minimum down payment of 10 per cent on the portion of home prices over $500,000.

Finance Minister Bill Morneau said homes purchased below the new price ceiling will remain at five per cent.

The changes take effect on Feb. 15 and come after a number of policy shifts in recent years to limit Canadians’ exposure to financial risks should the housing market experience a correction.

“We believe that by increasing the down payment . . . we will create a better buffer for people and make people more secure, and have the entire market be more stable,” Morneau told reporters in Ottawa.

The federal minister acknowledged the new measure will affect fewer than 10,000 home purchasers, or one per cent of the total market.

We see that the market in general is stable. Canadians should feel comfortable with their home purchases and we recognize that our job is to ensure that remains the case,” he said.


“We’re looking at some housing market risks, some pockets of risks, that are important . . . in Toronto and Vancouver. This measure carefully targets that to make ensure that the homeowners in those markets are protected.”

Observers said the move, which comes as the federal government doubled the minimum down payment on houses over $500,000, is also intended to cool Canada’s hot housing market.

As well, the minister said “we consider the fact that the Alberta situation is challenging. We want to make sure we’re doing things that don’t negatively impact that market . . . and only impact those homes over $500,000 up to a million (dollars).”

Meanwhile, homes valued at $1 million or more will still be required to provide a down payment of 20 per cent.
While one per cent of national home sales are above $500,000, the average in Vancouver is six per cent and four per cent in Toronto.

About 35 per cent of new Canadian home purchases each year are insured, through CMHC or one of the two private insurers in the market.

Friday’s announcement had been widely expected, given growing concerns that the housing market was becoming overheated and could put homeowners at risk if prices collapsed.

“With the economy taking a turn for the worse (check oil), debt loads surging and major market home prices at record highs, urgency was building for policymakers to do something,” said Rob McLister, founder of

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Ishtiaq Ahmed

Ishtiaq Ahmed

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CENTURY 21 Innovative Realty Inc., Brokerage*
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